STR: Hotel construction in December down 61K rooms from peak

HOTEL CONSTRUCTION DROPPED in December, falling 61,000 rooms below the peak reached in early 2020, according to STR. The number of projects under construction and in final planning is particularly down from the same time last year while many more are in the planning phase.

There were 158,906 rooms in the construction phase in December, down 19.2 percent from the same month in 2020, according to STR.  There were 185,231 rooms in final planning, down 20.6 percent from 2020, but there were 284,502 rooms, up 38.9 percent from the previous December.

“This past year was the second in a row with far fewer rooms in construction and final planning, but the rise in planning activity could be an indicator that that the pandemic’s impact on the pipeline will be different than what we saw during the Great Recession,” said Alison Hoyt, STR’s senior director of consulting. "During the previous recession, construction declines persisted from 2008 through 2010, but with massive jump in planning today, the construction downturn may not last as long as more rooms advance to later phases of the pipeline.”

The top market for hotel construction, New York City, had more than 15,000 rooms in construction as of Jan. 5. Only five other markets have more than 4,500 rooms in that final phase of the pipeline, including:

1. Las Vegas (5,368 rooms)
2. Atlanta (5,078 rooms)
3. Dallas (4,764 rooms)
4. Nashville (4,708 rooms)
5. Los Angeles (4,620 rooms)

“New York City had been a front-runner for quite some time in terms of hotel construction, and we anticipate a strong supply increase in the market as we move throughout the new year,” Hoyt said. “While the market still has a ways to go in terms of performance recovery, holiday demand in both November and December helped push performance levels, with the market at one point reporting the highest weekly occupancy level among all STR-defined markets. Moving forward, New York City will be able to build on the recovery that has already taken place once business travel and groups return at a higher level.”

Dallas was the top market in the U.S. hotel construction pipeline in the third quarter of 2021 in terms of projects, according to an October report from Lodging Econometrics.